Kyiv Post

September 7, 2005

Czech Tomas Fiala, 31, managing director of investment and brokerage house Dragon Capital, never actually received his degree in international relations and trade, which he studied at Prague’s University of Economics. But that didn’t stop him from becoming a successful young investment expert, nor from heading a corporate office in Ukraine when he was just 22.

Fiala started working for Wood & Co., a Prague brokerage and investment outfit, when he was still a student. After a while the idea of seeing the world became enticing, so when several investment funds invited him to work for them in London or New York, he was all ears. But then Wood & Co offered him the chance to open a company office in Moscow, Bucharest or Kyiv. Fiala decided staying in Eastern Europe would be more exciting than working in a well-established market, so he took a leap and moved to the Ukrainian capital.

“In high school I studied in Germany for a year, working for Volkswagen in Prague and in what’s now the HVB bank. And in general I like to travel,” Fiala says in his unaccented Russian.

“I thought it would be interesting and that I could always go back to the West if I wanted to.”

“I wrote a business plan [for the representative office in Kyiv] that was approved by our investors, in particular Commerzbank, and in October of 1996 I came to Kyiv.”

Fiala took to Ukrainians, whom he calls “open and friendly,” fast. As for the business scene, he says it was predictable. Ukraine was going through the same processes that Central European countries had five to 10 years earlier.

“We didn’t have to invent anything new. We could just repeat what was already done [in Central Europe]. There was no need to invent the bicycle. The proper execution of ideas was much more important.”

Wood & Co.’s major competitors in Ukraine, Fiala says, were Russia’s Alfa Capital and Renaissance Capital. In the 1998 financial crisis, however, those companies were bumped out of their dominant positions on the Ukrainian market.

“Nineteen ninety-eight for us was the break-even point. We didn’t lose any money, unlike many in Ukraine and Russia. In 1999 we made a profit.”

Fiala says his firm’s major success was made possible by its research team, which made the sometimes treacherous shoals of the Ukrainian economy navigable for Western European and American investors. Still, after the crisis, many foreign investors withdrew from the market and were replaced by locals. In the last couple of years Western capital has started to return, enticed by a large and growing consumer market, abundant natural resources and inexpensive labor. Altogether, Fiala says, the result has been increasing activity for his company and the expansion of his business, especially after the 2004 election. He points to “a very significant increase since the beginning of the year,” and says Dragon has “had to expand to 25 more people,” with “another 35 coming.”

Dragon rising

In 2000, however, Fiala wasn’t even planning on sticking around Ukraine. He had recently left Wood & Co. and wanted to finish his higher education and get an MBA.

A couple factors made him change his mind. First, Viktor Yushchenko, then prime minister, was heading the government. Second, Fiala held some shares in the Kharkiv brewery Rogan, which he’d received in return for his Wood & Company shares, so some of his money was still tied up in Ukraine. Together with some of his former colleagues he decided to create his own investment bank and brokerage company. The company was named after the symbol of his native city of Brno, which happens to be a dragon. “It looks more like a crocodile,” he laughs.

“When Dragon Capital was created, the best people who worked for Wood & Co. came here. Within six months Wood & Co. had closed its Ukrainian office.”

That wasn’t only due to Dragon’s raiding, he says: the Czech company was no longer interested in the then-idle Ukrainian stock market and wanted to focus exclusively on Central Europe. Dragon Capital, meanwhile, broadened its activities to encompass corporate finance, capital generation, privatization, mergers and acquisitions, financial advising and private equity.

“The private equity business had become quite important for us. After the crisis we saw many very cheap enterprises that could be bought either through privatization or through consolidation of property, so we started doing it.”

One of the company’s original investments, Rogan brewery, was sold to Interbrew in 2000, after its value increased fourfold in four years and sold for $16 million.

“The consumption of beer in Ukraine is growing now, up from relatively low figures. It’s a good sector and one that’s close to me as a Czech. With 160 liters a year per capita, we lead the world in beer consumption.”

Dragon Capital is currently turning its attention to, among other areas, agriculture, agricultural machinery, and real estate development and construction. One project is the Forum business center in Kyiv, on the site of what used to be a Soviet shoe factory. A chain of home improvement marts called Novaya Linia (New Line) is another promising Dragon investment.

Where the wind blows

The cliche about good athletes tending to become successful businessmen applies to Fiala, who has been a serious sailor since he was a kid on Czechoslovakia’s junior national sailing team. He still sails once in a while, though non-competitively.

The hilly Czech landscapes, in turn, got him skiing at an early age. And since he loves seeing the world, he travels to exotic countries every year with friends. Last year’s destination was Mozambique.

Now, with business growing, Fiala has no plans to leave the city. Last year’s election and political crisis, during which he considered moving out of Ukraine if Viktor Yanukovych became president, is history.

“Freedom is important for me - to be able to say things without looking around myself,” he says. “Around the election last year, I was seriously thinking about [leaving].”

“Now there’s something very interesting happening. No matter whether Ukraine becomes a part of European Union or not, it’s now starting to move towards European standards.”